Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 9-2004)
The purpose is to implement certain provisions of Republic Act No. 9238, re-imposing the gross receipts tax (GRT) on banks and non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries starting January 1, 2004.
A financial institution refers to banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries including finance companies, but excluding insurance companies.
Banks include universal banks, commercial banks, thrift banks (savings and mortgage banks, stock savings and loan associations, and private development banks), cooperative banks, rural banks, Islamic banks, and other classifications determined by the Monetary Board of the Bangko Sentral ng Pilipinas.
Entities whose principal functions include lending, investing, or placement of funds or evidences of indebtedness or equity, regularly engaged in lending or purchasing receivables, with funds obtained from the public through issuance or endorsement of debt instruments or similar financial instruments.
Borrowing funds from twenty or more lenders through debt instruments other than deposits for relending or purchasing receivables, excluding borrowing by non-financial companies for their own financing needs.
Alternative forms of obtaining funds from the public through issuance of debt instruments for relending or financing needs, excluding inter-bank call loans with maturity of not more than five days for reserve deficiencies.
Gross receipts include financial intermediation service fees, financial leasing income, rentals, royalties, commissions, trust fees, estate planning fees, service fees, trading gains, foreign exchange gains, gains on sale or redemption of investments, net gain from sale of foreclosed properties, and other gross income related to financial institutions.
5% on interest, commissions, discounts from lending activities with maturity of five years or less; 1% on similar income with maturity more than five years; 0% on dividends and equity shares in net income of subsidiaries; 5% on royalties, rentals, profits from exchange and other items; and 5% on net trading gains.
Net trading loss may be deducted only from net trading gain within the taxable year. Losses cannot offset other types of gross receipts and cannot be carried over to other taxable years.
In financial leasing, gross receipts tax applies only to the interest income portion, while in an operating lease, the gross receipts tax applies to the entire gross rental amount. The classification depends on the substance of the lease agreement.
The maturity period is reckoned to end on the date of pretermination, and the transaction is reclassified to apply the correct tax rate. Adjustment in tax due is reflected separately in the GRT return for the month of pretermination.
They should file and pay monthly within 20 days after the end of the taxable month using BIR Form 2551M at the concerned revenue district office or authorized agent bank where they are registered or required to register.
They must update their registration by filing BIR Form 1905 to convert their status from VAT-registered to Non-VAT taxpayer on or before July 31, 2004, following procedures similar to prior centralized registrations at the BIR National Office.
Taxpayers must submit an inventory of unused VAT invoices by July 31, 2004, and may use these until that date provided they are stamped 'Non-VAT receipts' and countersigned. The cost of unused VAT invoices incurred shall be allowed as an income tax deduction for 2004.
They must file VAT returns and pay VAT for January 2004 and part of February 2004, and file gross receipts tax returns and pay GRT for January and February 2004 by specified deadlines without any deductions other than creditable VAT withheld by government institutions.
Excess input tax credits shall be governed by Section 112 of the Tax Code, which outlines the refund or tax credit process for input taxes remaining unused after conversion.
Yes, for transactions from January 1 to February 13, 2004 where VAT receipts were issued, clients may claim a refund from financial institutions until June 30, 2004, upon surrender and cancellation of VAT receipts in favor of issuance of non-VAT receipts.
They may credit VAT refunded to clients against GRT liability in the March or April 2004 GRT returns, supported by schedules of cancelled VAT receipts substituted with non-VAT receipts clearly marked 'cancelled.'
According to the Separability Clause, if any provision is declared unconstitutional or invalid, the remaining provisions not affected shall remain valid and effective.